Four Common Crime Schemes in Business

And best practices for preventing them

Although the vast majority of employees are honest and ethical, employee theft does occur. The Hanover Insurance Group Inc. recently shared insights into four common crime schemes and provided best practices to help business owners prevent them. Based on a study of claims experience, The Hanover identified the following common crime schemes in business:

1. Billing and vendor schemes. Employees set up false vendor accounts and bill the company for nonexistent products or services.

2. Check tampering schemes. Employees use company checks to pay themselves or reissue the company’s old outstanding checks and alter the payee to themselves.

3. Payroll schemes. Employees manipulate the amount on their check, or create duplicates of their check to cash more than once.

4. Expense reimbursement schemes. Employees submit additional expenses that never occurred or were not of a business nature and are then reimbursed for those bogus expenses.

The Hanover recommends business owners consider the following best practices:

• Perform thorough background checks (in accordance with law) of all potential hires; don’t take shortcuts or assume. (For CBIA member discounts on employee background checks, visit cbia.com/discounts.)
• Make sure there is clear accountability for every position in the organization and that no position has broad enough power to authorize payments without the consent of another individual. Set up a system of checks and balances.
• Set up a tip line for the organization, guaranteeing anonymity, in order to allow for the reporting of any suspicious activity or suspicious business practices.
• Encourage all employees who handle accounting and payment functions to take vacation time, with another person handling their work in their absence.
• Communicate often and clearly about the company’s policy on employee conduct.
• Don’t allow discrepancies to be attributed simply to the cost of doing business. Be sure to conduct a thorough investigation of discrepancies.

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